Cleveland considers asking hospitals, nonprofits to pay fee

Thomas Ondrey, The Plain Dealer A consultant hired by the city to find ways to shore up the city’s budget proposes that nonprofit organizations such as the Cleveland Museum of Art — whose Rodin sculpture room is shown — the Cleveland Clinic and Case Western Reserve University that are exempt from property taxes kick in annual fees to boost the city’s bottom line.

In the search for dollars that could help shore up Cleveland's budget shortfall, consultants hired by the city propose that hospitals, universities, museums and other tax-exempt institutions pay an annual fee.

A fee on the institutions -- which do not pay property taxes because they are nonprofits -- could generate at least $5 million annually, according to the 344-page report released this week.

"As large property owners and major regional employers, tax-exempt organizations have a significant stake in the current and future operations of the city," states the report, prepared by PFM Group of Philadelphia in conjunction with several other consulting firms.

Cleveland Mayor Frank Jackson said Friday that he's open to the idea of asking nonprofits to pay a fee and will consider it in the coming months as a long-term revenue option.

"We're not saying yes or no to anything right now," Jackson said.

Cleveland Finance Director Sharon Dumas said the city has no legal authority to levy or collect property taxes. That would be the county's jurisdiction.

"There isn't anything stopping us from initiating a conversation with the county saying that we would be interested in such a thing," Dumas said.

University Hospitals declined to comment on any possible fee. The Cleveland Clinic has historically not supported a payment in lieu of taxes and a spokeswoman pointed out Friday that the health system already gives back to the local economy with jobs, free medical care and other contributions.

The Sisters of Charity Health System, which includes the downtown St. Vincent Hospital, said in an e-mail statement that any "additional fees would be difficult to absorb and detract from our mission to provide quality urban medicine to all who walk through our doors."

The consultant's report states that many cities around the country have partnered with local non-profits, which do utilize city services, to create some type of program that provides payments. Those include Boston and Cambridge, Massachusetts as well as Madison, Wisc., and Pittsburgh, Penn.

But Bill Ryan, president and chief executive of the hospital trade-group Center for Health Affairs, said it's not fair to compare Cleveland with the other cities because the nonprofits here provide hefty city revenues through their employee income taxes.

The Clinic and UH, which are two of the region's largest employers, publish reports annually on the millions they provide to the community through outreach programs, charity care, research and education. This week, the two institutions announced they had given a combined $646.1 million in 2008.

Clinic Chief Executive Dr. Toby Cosgrove told hundreds of attendeesat a community breakfast Friday that "we would very much like to see this region thrive."

The Clinic is in the midst of several long-term fights to retain tax-exempt status on properties across the region, according to David Seed, an attorney representing school districts in lawsuits involving the Clinic. Beachwood, South Euclid-Lyndhurst, Willoughby-Eastlake, Independence and Cleveland schools are all participating in lawsuits.

Zach Schiller, research director at Policy Matters Ohio, co-authored a report with Cuyahoga County Treasurer Jim Rokakis in 2004, saying that the Clinic and UH together have at least $1.3 billion in tax-exempt property in the county that at the time would have generated more than $34 million a year in additional taxes.

Rokakis fought for a fee in lieu of taxes in 2004 but said this week it was "no longer my fight." Other people, he added, would need to pick that battle.

"The Cleveland property tax base is shrinking every year," Rokakis said. "The city is emptying out. . . . For a school system that relies so heavily on property taxes and a city that relies so heavily on property taxes, the consequences are devastating."

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